Report - SRD Conference 3r February 2015

23.02.2015

On 3 February 2015, EuropeanIssuers, ACCA, BUSINESSEUROPE and ecoDa organised a joint conference on Shareholder Rights called "Striking the right balance in corporate governance and shareholder engagement. 

The debate revealed that, while the objective of improving communication between companies and shareholders is welcome in principle, several speakers expressed the view that the proposals on related party transactions and remuneration go too far. And while companies are pleased with the proposal’s intention to give them the right to identify their shareholders, they suggested that some of the wording needs to be better aligned to the complexities of today’s capital markets. 

After a welcome note by Jérôme Chauvin, Deputy Director General at BUSINESSEUROPE, a presentation of the main features of the SHRD proposal by Jeroen Hooijer, Head of Unit of Company Law in DG Justice and Consumers at the European Commission, a video message by Sergio Cofferati, MEP, and a key note address by Cecilia Wikström, MEP,  the first panel moderated by David Cooper, ACCA, and composed of Mike Everett, Governance & Stewardship Director at Standard Life Investments, Anders Würtzen,  Head of Group Public Affairs at Maersk, Cordula Heldt, Head of Corporate Governance and Company Law at Deutsches Aktieninstitut, Lars-Erik Forsgårdh (LEF), Chairman of ecoDa, and Tytti Peltonen, Vice President for Corporate Affairs at Metsä Group,  discussed the issue of  “Disclosure”, including the aspects of remuneration and  related party transactions. Key points from the 1st panel were: 

  • Panelists would prefer to see an approach that is more based on principles and leaves more detailed regulation to be designed according to the prevailing circumstances in each Member State.
  • Say on Pay may well be suitable for empowering share­holders and incentivising them to engage in the gover­nance of companies in jurisdictions where shareholder power and engagement is weak. However, in jurisdictions with strong shareholder power, the drawbacks may well override the advantages, leading to worse rather than improved corporate governance standards.
  • The current proposal on the related party transactions would (1) slow down the decision-making process, (2) force company groups to constantly monitor several thousands of transactions, (3) potentially lead to disclosure of information that should be kept confidential, and (4) create additional costs.
  • The panelists would recommend amending the draft directive by excluding ordinary business transactions from material related party transactions.

The second panel, moderated by Per Lekvall, Member of the Swedish Corporate Governance Board, and comprising Susannah Haan, Secretary General of EuropeanIssuers, Kirsten van Rooijen, Managing Director Netherlands of Computershare and Georgeson, Morten Kierkegaard, Member of the management for VP SECURITIES and Managing Director for VP SERVICES, Wilfried Blaschke, Senior securities analyst at Commerzbank, and Bram Hendriks, Senior Corporate Governance Officer at ING Investment Management, focused on “Communication”, including shareholder rights and  shareholder identification. Key points from the 2nd panel were: 

  • Pooled (omnibus) accounts may be cheaper than segregated accounts, but significantly reduce visibility and are problematic in terms of shareholder identification and voting. Vote confirmation needs more clarification from the industry in terms of what is required, when (investors want this as soon as sent) and to whom the confirmation can or should be provided.
  • Cross-border obstacles with multiple intermediaries in the investment chain may lead to excessive costs and time deferrals, thereby preventing shareholders from exercising their rights. Investors describe the cross-border voting process and costs as a black box.
  • All panellists agree that companies should have the right to identify their shareholders. Moreover, the most effective legal systems allow sanctions to be imposed.
  • While being positive about engagement with companies in which they hold larger stakes, institutional investors favour thresholds on shareholder identification in order to avoid having to engage with companies in which they hold smaller stakes. However, they are less concerned if the purpose of the identification is to enable the company to map out its shareholder base, rather than with the expectation to engage in every case.
  • Companies oppose both thresholds and opt-outs regarding shareholder identification as they would like the possibility to identify all their shareholders, and fear that these could render the right unworkable in practice e.g. by holding separate accounts below the threshold